South32 Limited is a globally diversified mining and metals company listed on the Johannesburg Stock Exchange (JSE) that produces bauxite, alumina, aluminium, energy and metallurgical coal, manganese, nickel, silver, lead and zinc at its operations.
The graph below shows the latest South32 share price (JSE: S32), which despite undergoing downward pressure over the past year, continues to attract plenty of investor interest in South Africa and beyond.
While the prevailing sentiment leans towards caution, South32 bulls may argue that the shares are currently undervalued. The significant drop in share price may have overreacted to short-term headwinds, creating an opportunity for long-term investors. The Hermosa project, while requiring substantial upfront investment, has the potential to be a game-changer, diversifying South32’s revenue streams and positioning it at the forefront of the green energy transition.
Moreover, the company’s active management of its portfolio, including the sale of non-core assets and the focus on operational efficiency, suggests that management is taking proactive steps to address the challenges it faces. Furthermore, the relatively high-dividend yield could make this an attractive stock for value investors who are willing to wait out some short-term volatility. This perspective acknowledges the risks but emphasizes the potential for long-term value creation, especially if commodity prices rebound and the Hermosa project comes to fruition as planned.
YOUR CAPITAL IS AT RISK
Recent Developments
Recent production reports have been a mixed bag. While some operations have met expectations, others have faced challenges, leading the company to maintain its annual production guidance. This underscores the operational complexities inherent in the mining industry, which is subject to a wide range of factors, including geological conditions, weather patterns, and logistical constraints.
South32’s financial year ending June 30, 2024, painted a stark picture of the challenges the company has faced. Revenue plummeted by 26% to US$5.59 billion compared to the previous year, and the company reported a net loss of US$173 million, translating to an earnings per share (EPS) of -2.49. This downturn can be directly attributed to the significant weakening of commodity prices across the board, particularly in coal, one of South32’s key revenue drivers, compounded by reduced production volumes.
The impact of these factors was significant enough to trigger a response from the company, including a substantial cut to its interim dividend and the suspension of its share buyback program in February 2024. This decision, while prudent given the circumstances, further dampened investor confidence.
Despite these challenges, South32 is actively pursuing long-term growth opportunities. The company approved a substantial US$2.16 billion investment in the Hermosa project in the U.S., signaling its commitment to diversifying its portfolio and tapping into the growing demand for critical minerals. The Hermosa project, targeted for first production in the second half of the 2027 financial year, is expected to produce zinc, lead, and silver, positioning South32 to capitalize on the anticipated increase in demand for these metals driven by the green energy transition.
The company’s dividend policy, while adjusted in response to short-term financial pressures, remains an attractive feature for investors seeking income. The most recent dividend was ZAR 54.23 per share, with an ex-dividend date of September 18, 2024, and a payment date of October 17, 2024. The next dividend is scheduled at ZAR 62.59 per share, with an ex-dividend date of March 5, 2025, and a payment date of April 3, 2025. The current dividend yield stands at 2.78%, providing some cushion against the stock’s recent price decline. However, the sustainability of future dividends will depend heavily on the company’s ability to improve its financial performance in the face of ongoing commodity price volatility.
Who is South32?
South32 Limited also owns a high-grade zinc, lead and silver development plant in North America and has several partnerships with junior explorers with a focus on base metals.
South32 Limited’s purpose is to make a difference in people’s lives by developing natural resources, improving circumstances now and for future generations and to be trusted by its owners and partners to realise the potential of their assets.
The history of South32 Limited can be traced back to 18 May 2015 when it was spun out of BHP Billiton. South32 was created to allow the management of both entities to focus on their own growth trajectories to ultimately unlock greater shareholder value. The name, South32, represents BHP’s footprint and its regional approach to managing its operations.
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South32 Limited is listed on the Australian Securities Exchange with secondary listings on the Johannesburg and London Stock Exchanges.
The company forms part of the Mining Industry and the Basic Materials Sector of the Johannesburg Stock Exchange (JSE).
South32 Stock Chart – 5 Year
Company Essentials
The company is headquartered at Level 35, 108 St Georges Terrace, Perth, Western Australia, 6000; and has more than 25,000 employees and run operations in Australia, Southern Africa, and North and South America.
CEO Graham Kerr is navigating the company through a challenging environment, focusing on strategic investments and operational efficiency. However, the company’s future performance will depend on a complex interplay of factors, including commodity prices, production efficiency, and the successful execution of its long-term growth strategy.
How to buy South32 Shares – Step by Step
The stock market is one of the most attractive financial markets that sees millions of retail investors and traders’ participating daily. To buy, sell or trade South32 shares on the Johannesburg Stock Exchange (JSE), traders and investors can follow a few simple steps:
- Find the share that you want to buy, in this case, “S32”.
- Select a broker that offers access to the Johannesburg Stock Exchange (JSE).
- Review the broker’s trading conditions, fees, deposit and withdrawal methods, trading platform, customer support, regulation, and other components to ensure that they are aligned with your trading plan.
- Open a live trading account with the broker by completing the online application form and providing the necessary documentation to verify the trading account.
- You are now ready to make your first share purchase through the broker.
- You can further start to build and diversify your portfolio by buying more shares.
YOUR CAPITAL IS AT RISK